Law Firm Malpractice Claim Preparedness
Don’t Be Alarmed, Be Ready
No one likes unpleasant surprises, especially in business. Which makes preparation a vital pillar in any business. Starting from when you prepare your business plan and continuing throughout the longevity of your business.
An unpleasant surprise that is specific to a law practice is a legal malpractice claim. Some attorneys prepare for the possibility of receiving a claim by protecting their practice with Lawyers Professional Liability Insurance. But unfortunately, many attorneys are under the blind assumption that a lawsuit won’t happen to them.
In this article, we will cover a few common scenarios of how a good situation can turn into horror by not preparing for the possibility of a claim and how you can take preventive steps to protect your law practice.
Scenario 1: The Attorney Who is Loved by Clients
Often, we hear attorneys say, “My clients love me, they won’t sue.”
That is great! Except when that phrase becomes a defense for being uninsured. We have seen claims roll in that do not come from the attorney’s loving client but from an upset relative or other opposing party.
Estate Planning is a perfect example of how the love of a client isn’t enough to protect your practice. But don’t think that this kind of situation is limited to this one area of practice.
Example:
You have a great relationship with your client and the legal services you performed were more than satisfactory. Everything is planned out just as they wish…. Then, it comes time to execute that plan and divvy up the estate to meet your client’s wishes. You do everything as your client instructed. However, an heir is displeased with the turnout and sues for legal malpractice. Even if your client had no mental issues and there are no grounds for the relative’s claim, it will still require a defense. With or without merit, you will need to legally address the accusation and protect your reputation.
Preparation:
Areas of practice such as Estate Planning, Trusts, and Wills are considered a “long exposure” since the Legal Services performed typically take place long before a claim arises. Since Lawyers Professional Liability Insurance is commonly a claims-made and reporting policy, the preparation for such an instance must happen prior to you taking on that client. By not having coverage in place prior to the services performed, and not maintaining that coverage continuously, you are left unprotected and will have to defend yourself at your own cost of money and time.
By not being prepared for a claim and protecting your practice with insurance, you will leave the stability of your firm vulnerable as you attempt to tackle the claim alone.
Scenario 2: A Returning Client Isn’t Always Good News
Clients return if they’re pleased with your service… In most cases. Sometimes, they come back with a lawsuit in hand and another attorney at their side.
We have seen matters in Family Law, and other areas of practice, where a client returns to sue the attorney who helped them previously. An accusation of legal malpractice is never taken lightly. But such an accusation can be frustrating when the attorney didn't do anything wrong in the provision of legal services.
Example:
Picture yourself having a solid relationship with your client. The communication is superb and your arguments against the opposing party are award worthy. The verdict comes in and your client is very happy with the turnout. You win another case, and your client will likely share their great experience working with you.
Then, one day, you receive a letter on your desk… You discover your previous happy client has been advised by another attorney that they could have won a sweeter deal had you done XYZ.
Preparation:
Even happy clients can become sour after hearing some possible alternate outcomes of their legal situation.
Are you prepared to go toe-to-toe with another attorney regarding a previous case of yours? If this scenario wound up on your desk tomorrow morning, would you have to pause your practice and defend yourself alone or would you have a full panel of defense counsel provided by your Legal Malpractice carrier?
Scenario 3: Even Meticulous Attorneys Are Susceptible
Legal Malpractice Claims do not always derive from an error. Crossing your T's and dotting your I's will not prevent an unhappy client from filing a complaint or suing you.
We have seen claims where it's as though the plaintiff names everyone they possibly can on their complaint. In these cases, the attorney is merely a bystander in the mission of a disgruntled client.
The best way to protect your law practice from such an unforeseen claim is to transfer that risk to an insurance company.
Strategies for Preparing For a Claim Without Insurance
Many states require an attorney to notify clients whether they carry professional liability insurance or not. However, that does not prevent many attorneys from going uninsured.
If not insuring your law practice is the route you decide, don't allow that decision to let you go completely unprepared. In addition to best practices to minimizing your risk, there are still things you can do to help your law practice should a claim arise.
Self-Insure by Financially Preparing:
Financial strain from a claim is a common cause for failing law firms. If you choose not to insure your practice with Lawyers Professional Liability Insurance, protect your practice by saving up a "Claims Fund".
Take your largest case and think 'worst-case-scenario'… What would it cost to defend and indemnify should a claim arise. Take that number and start saving!
It's important to also remember that the exposure from any case is ongoing. Be sure to plan for not just one possible claim, but several. To effectively "self-insure", a substantial amount of savings is essential. Add this to your expense report, not as a savings but as a self-insurance fund, and keep adding to it bi-weekly or monthly throughout your career.
Plan Out the Details:
Even if you're financially prepared for a claim, there is the matter of time and resources.
Self-Insuring also requires you to either be your own defense counsel or secure your own defense counsel. Whether you elect to hire defense counsel or choose to defend yourself, it will take your time and focus away from your law practice.
Create an action plan for you and your team in the event of a claim. Some key steps you'll want in your plan are:
- Secure Defense Counsel
- If defending yourself, plan out how you will build up your defense and the time it will take to do so.
- Delegate as many tasks as possible
- Assign administrative tasks that don't require your attention.
- Be intentional with any task or meeting requiring your attention.
- Double down on calendaring and docket controls
- Avoid overscheduling and having to reschedule appointments.
- Gather necessary documents pertaining to the claim.
Having a Business "Playbook" that has standard operating procedures laid out on all the processes that keep your law firm going will be very helpful as well. If someone new has been delegated something during the time of a claim, they would have access to important processes and procedures to help them get it done without disrupting your focus on the claim.
Strategies for Preparing For a Claim With Insurance
The essence of insurance is the transfer of risk. You pay a premium to an insurance company, and they accept your exposure. As focused and talented as you are in the practice of law, insurance carriers are skilled in accepting risks and defending claims. It can be your most advantageous business deal by securing coverage that is tailored to your unique needs.
Lawyers Professional Liability Insurance are typically claims-made and reporting policies, making it imperative to secure coverage before you start practicing and maintaining continuous coverage throughout your practice.
There are many different carriers that vary in policy forms, endorsements, and benefits. Reviewing the options available to you in full is crucial to ensuring you have the coverage and support team you need in the face of a claim. The flood of information and pressure to decide can be overwhelming, which is why we made a checklist to help attorneys choose the right professional liability insurance for their practice.
Wrapping up
Being prepared for unforeseen circumstances is the key to a successful business. Ponder each plan you have, think how it could go sideways, and prepare for that scenario. Panic sprouts from being ill-prepared in the face of a crisis and commonly causes rash decisions. Don’t let panic set back your success. Prepare your business for unexpected situations so you and your team can glide through them and continue in the direction you wish for your business.
To help, we created a Preparation Checklist. This checklist can assist you in your preparation, so you can ensure all your bases are covered in the event of an unforeseen malpractice claim.
